Category: Church Governance

UNINCORPORATED CHURCH ASSOCIATION DISORDER

Unincorporated church associations are governed, in some states, by a “non-profit organization” statute.  Such a statute may impose on the church association certain requirements to disclose financial records to members of the association.  An unincorporated church association can also have a Constitution and Bylaws.  The trap for the unwary is that such Constitution and bylaws, while not identical to those of an incorporated church, will not be effective as governing documents if they lack specificity similar to corporate cousins.

In the case of In Re Lee Edward Thomas, Slip Op. (Tex. Civ. App. 6th 2022), the Constitution and Bylaws of the unincorporated church association did not specify the procedure for termination of the pastor but did specify the procedure for hiring the pastor.  The same documents also described duties of a finance committee but did not disclose the method or procedure for appointment of finance committee members.  When the church split spilled into the street, each faction claimed it represented the congregation.  At stake was control of the church property and several hundred thousand dollars.  The bank holding the money threw up its hands and sought to interplead the money.  The trial court held the issue of the employment, or unemployment, of the pastor was outside the jurisdiction of the court because of the Ecclesiastical Abstention Doctrine.  Because the Constitution and Bylaws did not specify the method of selection of the finance committee members, their appointment was a matter of church governance, claims about which were barred by the Ecclesiastical Abstention Doctrine.  The court could not determine whether the allegedly voting members were in fact members because the church had not maintained an official membership roll.  However, embezzlement, conversion and breach of fiduciary duties claims were retained to the extent they could be decided by Neutral Principles of Law.

Unincorporated church associations have the same needs for governing documents and membership rolls as do incorporated churches.  The governing documents can certainly be inspired by the religious beliefs of members but the practical, secular, and, yes, worldly aspects should be drafted by a lawyer consistent with state statutory requirements.  Governing boards of unincorporated church associations should keep minutes just like incorporated churches and for the same reasons, such as documenting adoption of an annually updated membership roll and amendment of governing documents.  Without such, the unincorporated church association will fall into disorder which will be laid bare in an internal dispute.

LOCAL CHURCH MEMBERSHIP ROLLS

As we have reported several times, after maintaining the governing documents themselves, maintaining valid membership lists at least annually is about survival.  The local church that does not do both courts expensive legal repairs or a raid on assets.  Membership rolls should annually be made a part of the minutes of the church governing board.  Membership rolls kept in digital formats should at least annually be hard copy printed, or saved to media separate from the computer on which it is routinely hosted, and either or both attached to the minutes of the governing board.

In Cohen v Berliner, Unpublished Opinion (NY Supp Kings County 2021), the trial court held that the two hundred signatures submitted by the petitioner were not the valid ten signatures needed to demand a congregational meeting or vote.  However, the court conducted evidentiary hearings in which thirteen witnesses were tendered for testimony.  The local church owned a church camp primarily used in the summer.  The local church also leased the church camp to a parachurch organization for a girl’s summer camp.  Other local churches in the same denomination contributed money to the parachurch organization that operated the girl’s summer camp and that entity in turn leased the camp from the local church.  At some point, a falling out resulted and the churches supporting the para-church organization sought control over the summer camp.  The local church refused to surrender control.  The churches supporting the para-church organization submitted a petition for a congregational meeting by the local church supported by two hundred signatures from members of those churches, but none of which were members of the local church that actually owned the camp.  The petitioner sued to obtain a court order for the congregational meeting but the court upon holding extensive evidentiary hearings determined none of the two hundred signatories were members of the local church that owned the camp, but rather were members of the other churches.  The court rejected the claim that membership in the denomination was the same as membership in the local church absent such language in the governing documents.  The lease payments made by the parachurch organization did not constitute financial support of the local church that owned the camp, even if the lease payments were substantial.

Because the local church did not appear to have an official membership roll, each witness tendered had a shot at qualifying.  The court in the case reported may have given the petitioner as many as thirteen tries.  An official membership roll would have reduced the number of tries to one; only signatories also on the official membership roll could have been considered as “qualified” to call a congregational meeting.  A joint denominational asset like a church camp should be placed in a corporate shell controlled by the member congregations or the denomination and not owned by one of the constituent churches of the denomination.  Otherwise, no one but the owner of the denominational asset will have any say over its management, operation, sale or use as collateral.

The “Waring Blender”

The song Poor, Poor Pitiful Me, lyrics by Warren Zevon, and sung by Linda Ronstadt and covered later by Terri Clark related the woes of a woman that lacked mate picking skills:

Well I met a man out in Hollywood

Now I ain’t naming names

Well he really worked me over good

Just like Jesse James

Yes he really worked me over good

He was a credit to his gender

Put me through some changes Lord

Sort of like a Waring blender

Churches with poor pastor picking skills suffer similarly.  Churches, no matter how small, that do not generally follow their governance documents, typically corporate bylaws, experience similar woes.

In Iglesia Pentecostal Filadelfia, Inc. v Rodriquez, Slip Op. (Tex. App. 13th, 2021), the trial court dismissed the case because it could not tell who was in governing control of the church.  A warranty deed clearly indicated the church owned the church property.  But, the failure to follow the bylaws in electing governing board members, officers and pastors left the Court with no means to determine who was in charge.  The Ecclesiastical Abstention Doctrine, the court held, precluded the court from resolving the dispute in the absence of a record.  The pastor even admitted he had been unaware of the existence of any bylaws until the lawsuit was filed in 2018 even though the church was founded and incorporated in 1987 by his parents.  The appellate court affirmed.

The only solution for a church in such a situation is to hold a congregational meeting, elect a new board, and document its decision.  The documentation probably would need to be a resolution accompanied by a signature by every voting member of the church.  Adopting a formal church membership roll in the same manner might be required to allow verification of the congregational vote.  Any church, no matter how large or small, that does not document its governance consistent with its governing documents at least to some extent risks losing control of its property, its assets and its funds to a faction or even an interloper.  Such documentation is simple, freely available on the internet or other sources, and need be updated only a few times a year.  An official copy should be kept at the church offices and a digital copy off site.  The digital copy should be updated at least annually.

SEPARATE BUT NOT EQUAL

In a denomination (or a rose by any other name…conference, fellowship, or whatever word is used), the governing documents will determine the relationship between the denomination and the local church.  Typically, in most states, the practice generally is that both the denomination and the local church are separate non-profit corporations.  In some states, the local church may be an unincorporated association, which is also a type of legal entity.  However, the governing documents of the denomination, and maybe, too, the local church regardless of its form, may make the local church a type of “trustee” holding its property for the benefit of the denomination.  In such organizations, if the local church dissolves or departs from the denomination, the title to property reverts to the denomination.  In other words, the denomination and the local church may be separate entities but not necessarily equal.

In Church Mutual Insurance Company v Guideone Specialty Mutual Insurance Company, Slip Op. (Cal. App. 2021), the local church ceased to exist and the property reverted to the denomination pursuant to the denominational governing documents.  During the short interval while the property was, in effect, owned by both before the reverted title could be filed of record, the building was destroyed by fire.  The denomination’s insurer paid the loss but sought contribution, subrogation or indemnification by the insurer of the local church.  The trial denied the claim.  The appellate court affirmed the trial court.  The appellate court held that the denomination and the local church, as an unincorporated association, had an “agency relationship.”  But, that did not automatically make the two entities the same entity for insurance purposes, even if the denominational governing documents were cast in terms of “unity” of both.  In other words, too, the Church Mutual policy did not name the local church as an insured and the Guideone policy on the local church property did not name the denomination as an insured.  Thus, the denomination was not covered by both policies (and neither was the local church covered by both policies).

Just as the best practice is for the title of property to reflect a denomination’s reversionary interest, so too is it the best practice for the denomination to be named as an additional insured on the property insurance policy purchased by the local church.  Both practices are hard to install and police over time.  Denominations should work with their insurers to offer a “package” that contains such endorsements to their local churches.  Insurance purchases are typically an after thought both at the denominational and local church levels.  Thus, at both levels economies of scale through combined bargaining power are lost and higher premiums are habitually paid.